Recurring Deposit accounts have been around for a while and are still very popular. Many people of various ages would gladly put their trust in an RD account. So, what exactly is a Recurring Deposit account, and why are they so popular? Let us investigate.
What is an Recurring Deposit (RD) account?
A recurring deposit is one that is made on a regular basis. Many banks offer this service, which allows people to make regular deposits and earn decent returns on their investments. You may be wondering what a recurring deposit account is.
The process of making small monthly savings through the recurring deposit Plan allows the user to accumulate an appealing sum at maturity. The interest rates on recurring deposits are calculated on a quarterly compounded basis.
How does a Recurring Deposit account function?
An ordinary fixed deposit entails putting money aside that can be withdrawn after a certain period of time. Meanwhile, you are unable to change or supplement the amount of money.
With one major exception, the recurring deposit account follows a similar procedure. Rather than investing a lump sum, you should deposit a set amount into your RD account each month, as determined when you opened your account. This could be a small sum that will not deplete your savings account. And when the money matures, you’ll have a large sum that is greater than your principal plus interest.
The Benefits of a Recurring Deposit Account
- People are encouraged to save on a regular basis through recurring deposit schemes.
- The minimum deposit amount varies greatly from bank to bank. You can start investment with as Low as 1000₹.
- For Recurring Deposit Account The minimum deposit time period is six months and the maximum deposit timeperiod is ten years.
- The interest rate is the same as that offered on a fixed deposit. As a result, the interest rates are higher than those offered by Savings Accounts.
- Premature withdrawals are prohibited. However, depending on the bank, you may be able to close your account before the maturity date if certain conditions are met.
Important Considerations Before Applying for a Recurring Deposit
- Recurring Deposit Account Term Period: The term periods are divided primarily into three categories. Short-term tenure lasts from 6 months to a year, medium-term tenure lasts from more than a year to 5 years, and long-term tenure lasts from more than 5 years to 10 years. Before applying, you should look into the tenure.
- Offered Interest Rate: Before applying for an RD account, review the interest rate offered by the bank, as different banks offer different interest rates based on different term periods.
- Conditions of Premature Withdrawal: Generally, all banks provide the option of opening an RD account. They also provide the option of withdrawing the same early. If you decide to withdraw before maturity, the interest payable will be calculated based on the remaining tenure. Banks will also levy a penalty for such withdrawals. Thus, before you invest, select a bank that offers a high rate of interest and a low penalty for early withdrawal.
Required Documents for Opening a Recurring Deposit Account
- Application Form
- Passport size photo of your
- ID and Address Proof
- KYC Documents
How to Open an Online RD Account – Log in to your online banking or application.
- Click on the ‘Open an e-RD account’ button.
- Enter the account number to which the installment should be debited, as well as the amount and duration of the installment. Check the applicable interest rate and make a note of the account funds’ nominee.
- After you’ve selected the maturity amount, check the box to indicate that you agree to all of the terms and conditions.
- Submit an application. A confirmation message will appear, and the RD receipt will be emailed to the registered email address.
- The stated amount will be subtracted from the chosen amount.
Offline RD Account Registration
- Visit the bank branch where you already have a savings account.
- Complete the RD application form, including details such as the installment amount, mode of payment, deposit tenure, nominee, and other relevant information.
- Pay the first installment in cash or by check.
- The bank representative will process your application within the time frame specified.